OF FINANCIAL TERMS
Percentage Rate (APR): The total cost of credit expressed
as a yearly rate. Includes interest, loan discount fee (points)
and other credit costs.
Fee: Includes appraisal and credit report fees, and
Federal National Mortgage Association underwriting fee, if
Fee: Inspection of the house and neighborhood review
of sale prices of comparable houses to determine value of
property; may be included in mortgage insurance or application
Loan: A loan transferable from seller to buyer. May
require a larger down payment, but interest rate could be
Fee: May be charged for processing buyer’s
assumption of seller’s loan.
down: Amount seller pays to lender so buyer gets
lower interest rate. Inflated or nonnegotiable selling price
covers buy down.
all paperwork, financial transactions completed, and title
passes from seller to buyer.
Report Fee: Covers cost of buyer’s credit report;
may be included in the application fee.
Preparation Fee: cost of preparing legal papers.
Agent: Person or company holding all documents and
money until closing/settlement.
Insurance: Protects lender and buyer against loss.
Home Protection Plan: From builder of new home, to protect
against faulty materials or workmanship; on a pre-owned home,
first-year protection against unexpected major repair expenses.
Inspection Fee: charge for inspection of new construction
by lender or an inspector.
Origination Fee: a % of the loan; covers administrative
Difference between index and actual interest rate
Fee: Cost of a licensed person authenticating execution
of documents by both parties.
Charged in both fixed and adjustable rate mortgages to increase
mortgage yield and cover the closing costs. A “point”
is 1% of the mortgage.
Fee: A charge paid for recording the transfer of
a property; this fee is paid to a government branch.
Accounts: funds accumulated and held by the lender
in an escrow account to pay taxes, hazard insurance premiums
and other assessments imposed by municipalities or subdivisions;
also called prepaids, impounds or escrow funds.
Insurance: Often required to protect lender against
loss due to undiscovered title defects. An owner’s policy
costs less if bought at the same time. A Title Insurance Binder
is a commitment to insure the lender against such defects.
Taxes: Taxes levied on the transfer of property or
on real estate loans by state or local jurisdictions.
Administration: A federal agency that insures mortgage
loans with liberal down payment requirements for honorably
discharged veterans and their surviving spouse.